lsully999

Why the U.S. Prefers Quasi-Nationalization of Big Banks

You are all missing the point - completely; your perspective is not broad enough.

What the B of A/Lewis story tells you (in fact, confirms) is: the primary purpose of gov't is to preserve the state; nothing else, period. Remember: Lehman just failed and the WORLD (not just the U.S.) was on the brink of a financial meltdown of nuclear proportions. Under those conditions, do you really think the national gov't gives a rip about Lewis or B of A shareholders (like the lunatic Mr. Finger) ? In normal times, perhaps; in times in crisis - absolutely not. Nor should they.

As much as you may not like it, central govt's are required to preserve the general welfare of the public first and foremost; that is why terrorists are tortured and bank CEO's are whipped like Missouri mules. Most people - including many who post here - look at things and say: why ? Thank god they don't run things. A better perspective: what would the alternative yield - and how would the population react. [Would you really (and I mean: really) want Merrill to fail if it meant a truly lost decade ? Do you really want Citi, or Bof A or another major bank to fail ? And if you say yes, you have not completely thought thru the maco-economic ramifications, you care only about your own self interest or you are a nihilist - which, clearly, the fellows at Tech Talk are.]

Viewed through that prism, everything is clear - and as it should be. And you should really quit complaining.

Citi's Desperate Straits

Am I the only one who remembers that this entity is supported by a middle eastern prince ? Cit's share price may drop - but this company is absolutely going to survive.

JasonC has a point; but it is also were noting that, after the TARP infusion, Citi's Tier 1 capital is in excess of $100.0 billion; they also have loss reserves of $25.0 billion. That's a heck of a lot of cushion.

Fannie, Freddie Common Stock Is Now A Call Option

I grow weary of these articles which tend bash Frannie and Freddie.

Let's assume everything you (and the "Professor") say is true; so what ?!? [Frankly, the article touches so many things - the exact point is somewhat ellusive.]

First of all, to most people who are actually "in the trenches", "fair value" is a meaningless construct - unless you are going to liquidate a company (in which case, fair value would probably over state value). For some reason, "Going Conern" is a concept which somehow seems to have gotten lost in the shuffle.

"Fair Value" might make sense if you are valuing marketable securities; it makes absolutely no sense when attempting to value a 30 year-ish mortgage portfolio in the worst "down" market in 80 years. If you assume the housing inducstry will eventually recover (and if you do not - this is all a meaningless exercise) the "true" value of these portfolios is almost certainly more than the "Fair Value". [And, of course, if you believe that is true, then you purchase those "options" !]

And for the life of me, I simply do not understand why people are so against the Federal Government doing whatever it can to save these institutions; do you really want them to fail, really. [If you do, you lack any credibility.] As near as I can tell, most people appear to be upset that a few executives may have made a little too much money and/or lobbied a little too much on behalf of their company. Talk about throwing the baby out with the bath water ! Good lord; get real.

As a republican, it pains me to say it: but at base line, we really want these companies to behave like utilities; we want them to provide a basic, fundamental service at the best price, further to overall policy objectives and macro-economic constraints. Believe it or not, the recent "bail-out" package put in place certain regulatory oversight which would facilitate such a transition. It's a middle of the road solution which probably makes the most sense. More rational rhetoric will discuss the path upon which we get from here to there.

Fannie's Last Five Quarters Show Need for Breakup

Citigroup has an even larger loss - and is a fraction of the size of Fannie; so on a relative basis, Fannie is out performing Citigroup.

I agree with 76s' general premise. Let's say you break these entities up into 5 separate companies; each company than has a loss equal to 1/5 this amount. What's the difference ?

The solution is to - esentially - turn them into a utility, and regulate the heck out fo them.